DEBT AND CAPITAL LEASE OBLIGATIONS

1.875% CONVERTIBLE DEBENTURES

In March 2008, the Company issued and sold $181.5 million aggregate principal amount of senior unsecured convertible debentures due March 15, 2028 (debentures). The debentures pay interest at 1.875% per annum, payable semi-annually on March 15 and September 15 of each year, and commenced paying interest on September 15, 2008. The debentures will mature on March 15, 2028, subject to earlier repurchase or conversion. Each $1,000 principal amount of debentures is initially convertible, at the option of the holders, into approximately 42.5351 shares of the Company’s common stock, at any time prior to the maturity date. The conversion rate is subject to certain adjustments, but will not be adjusted for accrued interest or any unpaid interest. The conversion rate initially represents a conversion price of $23.51 per share. The debentures contain a "change in control" provision, including a potential change if a majority of the members of the Board of Directors are not incumbent directors. The Company may be required to make an offer to repurchase all of the outstanding debentures at a price equal to 100% of the principal and unpaid interest of the debentures. Subsequent to March 31, 2013, the Company's Board of Directors has taken steps pursuant to the debenture agreement to mitigate the impact of these "change in control" provisions.

Holders of $164.3 million of the debentures exercised their option to require the Company to repurchase all or a portion of their debentures on March 15, 2013. Holders of the outstanding $2.2 million of debentures may require the Company to repurchase all or a portion of their debentures on March 15, 2018 and March 15, 2023, or at any time before March 15, 2028 upon the occurrence of certain events including a change in control. The Company also has the option to redeem the remaining $2.2 million of outstanding debentures for cash beginning on March 22, 2013. The outstanding balance of $2.2 million is reported as a long-term debt obligation as of March 31, 2013. In October 2009, the Company undertook the exchange of $15.0 million face amount of the convertible debentures for 1.84 million shares of the Company's common stock.

Amortization expense related to the issuance costs of the debentures was approximately $0.2 million in each of the three- month periods ended March 31, 2013 and 2012, respectively. The interest expense on the debentures was approximately $0.7 million and $0.8 million for the three- month periods ended March 31, 2013 and 2012, respectively. The Company made cash payments of $1.6 million for interest on the debentures for each of the three- month periods ended March 31, 2013 and 2012.

1.75% CONVERTIBLE DEBENTURES

In October 2012, the Company completed the issuance and sale of $396.75 million of 1.75% senior unsecured convertible debentures, due October 15, 2032. Each $1,000 principal amount of these new debentures is initially convertible, under certain circumstances and during certain periods, into 60.4961 shares (subject to customary anti-dilution adjustments) of the Company's common stock, which represents an initial conversion price of $16.53 per share. The debentures also include an embedded conversion enhancement feature that is equivalent to including with each debenture a warrant initially exercisable for 30.2481 shares initially at $16.53 per share (both subject to customary anti-dilution adjustments). The Company, at its election, may settle conversions of the debentures in cash, shares of its common stock or any combination of cash and shares of its common stock. Debenture holders have the right to redeem their debentures at face value plus accrued and unpaid interest, up to, but excluding, the relevant repurchase date on October 15 of each of 2019, 2024, 2029, and upon the occurrence of certain corporate events. The Company will have the right to call the debentures at any time on or after October 20, 2019. The debentures contain a "change in control" provision, including a potential change if a majority of the members of the Board of Directors are not incumbent directors. The Company may be required to make an offer to repurchase all of the outstanding debentures at a price equal to 100% of the principal and unpaid interest of the debentures. Subsequent to March 31, 2013, the Company's Board of Directors has taken steps pursuant to the debenture agreement to mitigate the impact of these "changes in control" provisions.

The debentures were bifurcated under U.S. GAAP into separate debt and equity components, and reflect an effective maturity (to the first optional redemption date) of seven years. The residual amount of $141.6 million recorded within equity is treated for accounting purposes as additional debt discount and accreted as an additional non-cash interest charge to earnings over the expected life. Debt and equity issuance costs totaling approximately $12.4 million were deducted from the gross proceeds of the offering and the debt portion is being amortized ratably over 84 months. Net proceeds of $384.3 million from the offering were used to retire $164.3 million of the Company's $166.5 million of outstanding 1.875% convertible debentures redemption on March 18, 2013, with the remaining proceeds to be used for general corporate purposes.

The senior unsecured convertible debentures have an effective interest rate of 8.50% and a stated interest rate of 1.75% with interest paid semi-annually. The balance outstanding for the period ended March 31, 2013 was $262.1 million, which is net of unamortized discount of $134.7 million.

Amortization of debt issuance costs and interest expense related to the issuance of the 1.75% senior unsecured convertible debentures was $0.3 million and $5.6 million, respectively, for the period ended March 31, 2013. The Company made no cash payments for interest during the period ended March 31, 2013.

EXEMPT FACILITY REVENUE BONDS

The Company also has outstanding a $30.0 million offering of 8.0% Exempt Facility Revenue Bonds, Series 2000, issued through the State of Montana Board of Investments and due July 1, 2020. The balance outstanding at March 31, 2013, was $29.6 million, which is net of unamortized discount of $0.4 million. The Company made no cash payments for interest on the revenue bonds during the three- month periods ended March 31, 2013 and 2012.

ASSET-BACK REVOLVING CREDIT FACILITY

In December 2011, the Company signed a $100.0 million asset-backed revolving credit agreement with Wells Fargo Capital Finance, incurring debt issuance costs of $1.1 million. Borrowings under this working capital facility are limited to a borrowing base comprised of 85% of eligible accounts receivable and 70% of eligible inventories. Borrowings will be secured by the Company’s accounts receivable, metals inventories and other accounts. The asset-backed revolving credit facility includes a single fixed-charge coverage covenant that only takes effect when less than 30% of the total borrowing capacity under the line remains available. The facility includes a $50.0 million letter of credit sub-facility. Outstanding borrowings under the facility accrue interest at a spread over the London Interbank Offer Rate that varies from 2.25% to 2.75%, decreasing progressively as the percentage drawn against the facility increases. The Company also pays an unused line fee on committed but unutilized commitments under the facility at a rate per annum of 0.375% or 0.5%, depending on utilization of the facility. The asset-backed revolving credit agreement does contain a "change in control" provision which if triggered would constitute an event of default under the credit agreement. If the credit agreement were accelerated following an event of default, holders of such indebtedness would have a right to accelerate the indebtedness thereunder. Since establishing this revolving credit facility, the Company has not yet drawn a balance, although approximately $17.5 million has been utilized to collateralize outstanding irrevocable letters of credit in support of the Company's long-term reclamation obligations. The acceleration of the agreement would require the Company to establish alternative collateral in place of the current $17.5 million irrevocable letters of credit.

On January 13, 2012, the Company completed the syndication of this facility to a group of four banks and simultaneously expanded the maximum line of credit to $125.0 million. The Company recognized $0.3 million in fees associated with the asset-backed revolving credit agreement in the three- month period ended March 31, 2013 and $0.2 million for the three- month period ended March 31, 2012. Amortization expense related to the issuance costs of the credit agreement was less than $0.1 million for the three- month periods ended March 31, 2013 and 2012, respectively.

CAPITAL LEASE OBLIGATIONS

In June 2012, the Company entered into a lease agreement with General Electric Capital Corporation (GECC) covering the acquisition of a tunnel-boring machine for use on the Blitz project adjacent to the Stillwater Mine. The transaction is structured as a capital lease with a four-year term; lease payments are due quarterly in advance. In the third quarter of 2012, the Company increased the lease balance due under the original GECC capital lease by $0.7 million. The Company made cash payments of $0.5 million on its capital lease obligations during the three- month period ended March 31, 2013. These cash payments included interest of $0.1 million. As of March 31, 2013, the outstanding balance under the capital lease was $6.0 million.

The following is a schedule, by year, of the future minimum lease payments for the capital lease together with the present value of the net minimum lease payments:



Quarter ended March 31, 2013 (In thousands)
Remaining 2013	$	1,626
2014	2,168
2015	2,168
2016	590
Total minimum lease payments	6,552
Less interest at rates ranging from 5.21% to 5.46% (before tax)	547
Net minimum lease payments	6,005
Less current portion	1,880
Total long-term capital lease obligation	$	4,125

CAPITALIZED INTEREST

The Company capitalizes interest incurred on its various debt instruments as a cost of specific and identified projects under development. For the three- month period ended March 31, 2013, the Company capitalized interest of $0.8 million. The Company did not record capitalized interest as a cost of properties under development in the comparable period in 2012.